Industry evolution: Empirical studies on industry emergence

Abstract

Industry evolution research focuses on answering the key dilemma of the field of strategic management, that is, what makes certain firms successful and others to fail, from an evolutionary perspective. The course Industry Evolution has been in the syllabus of the Department of Industrial Engineering and Management at Aalto University / Helsinki University of Technology since 2005. The present publication comprises a selection of graduate student course assignments from the Spring term of 2012 when the course was lectured jointly by the editors of the publication, Joonas Järvinen and Mirva Peltoniemi. The course was originally established and lectured until 2010 by Prof. Juha-Antti Lamberg (currently at University of Jyväskylä). The publication includes: (1) Evolution of the emerging US hybrid electric vehicle industry (by Teemu Heiskanen, Anni Pekkala, Taina Pere and Sebastian Sillanpää; (2) The refractive laser eye surgery equipment industry evolution in the United States (by Karla Nieminen, Macarena Pallares, Jenni Silvennoinen and Elina Virtanen); and (3) Legitimacy of the Finnish payday loan industry (by Tomi Hiirsalmi, Ilkka Lampio, Liisa Sallinen and Arttu Vesterinen). First, the study by Heiskanen et al. (2012) focuses on hybrid electric cars industry within the US with an aim to identify the stage of the HEV industry life cycle and provide insights of the firm success factors in the industry. By applying industry life-cycle (ILC) theory, their findings imply that the development of entry rates, firm density, sales volumes, prices, and innovativeness behave as the ILC theory predicts. In contrast, the results also suggest that exit rates do not behave as expected. In the light of the ILC theory, they suggest that theHEV industry is in its emergent phase. The study also identifies that early entrance and innovativeness are key factors for firm survival. Second, Nieminen et al. (2012) study the refractive laser eye surgery equipment industry in the United States. They test the propositions of firm survival central to the industry life-cycle literature, i.e. the effects of entry timing, preentry experience and innovativeness on firm survival. Moreover, they analyze the shift from product to process R&D predicted by the theory. They find that preentry experience and innovativeness improve the probability of firm survival, while early entry does not bring about such an advantage. Moreover, they find that instead of a clear shift from product to process R&D there are cyclical trends. Third, Hiirsalmi et al. (2012) present a study with a focus on legitimacy of a payday loan industry in Finland. On the basis of earlier research, they first suggest that the legitimacy of an industry consists of 1) density-based; 2) regulative legitimacy; and 3) social legitimacy. By applying this framework in the research context, they then find out that themost important legitimacy factor for the payday loan industry is regulative legitimacy, which can be comprehended as a perquisite for the other two legitimacies. Further, they suggest that with regulative legitimacy, an industry can grow and flourish, even if social legitimacy is not that high. As a conclusion, we believe that the assignments offer interesting insights for both firms operating in the studied industries but also firms in industries experiencing similar kinds of dynamics and particularly management researchers interested in evolutionary research.